• The formation of an ascending triangle chart pattern indicates a volatility contraction.
• Advancing 50-EMA indicates that the upside bias in the short term is still solid.
• A 40.00-60.00 range oscillation by the RSI (14) indicates that investors are awaiting a trigger for a decisive move.

The GBP/JPY pair has corrected after facing barricades around the psychological resistance of 160.00 in the Asian session. The cross has slipped to near 159.50 and is likely to remain on tenterhooks amid volatility contraction. Trading activity is expected to remain quiet as Japanese markets are closed on account of Coming of Age Day.

On an hourly scale, the cross is auctioning in an Ascending Triangle chart pattern that signals a volatility contraction. Usually, a volatility contraction is followed by a breakout, which results in wider ticks and heavy volume. The horizontal resistance of the aforementioned chart pattern is plotted from January 4 high around 160.20 while the upward-sloping trendline is placed from January 5 low at 158.52.

At the time of writing, the cross is looking for support around the 20-period Exponential Moving Average (EMA) at 159.53 after a mild correction. While the 50-EMA at 159.25 is sloping north, which indicates that the short-term trend is solid.

The Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates that investors are awaiting a fresh trigger for a decisive move.

For an upside move, the cross needs to deliver a breakout of the chart pattern above January 4 high around 160.20, which will drive the asset towards December 27 high around 161.00. An upside break of the latter will expose the cross for more upside to near December 28 high around 162.34.

Alternatively, a breakdown below January 5 low at 158.52 will drag the cross towards January 3 high at 157.46 followed by January 3 low at 155.36.

GBP/JPY hourly chart